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Hasbro's follows Q2 gains with price jump

By Staff -- Gifts and Dec, 7/22/2008 2:44:00 PM

PAWTUCKET, R.I.—Hasbro this week reported a 13 percent jump in revenue, propelled by double-digit gains among its licensed and core product lines, in its second quarter.

The toymaker’s second quarter net revenues were worth $784.3 million. Excluding gains from foreign currency conversion, the revenue jump was 10 percent compared to the second quarter of 2007.

The company reported net earnings for the quarter of $37.5 million or $0.25 per diluted share, compared to $4.8 million or $0.03 per diluted share in 2007. The 2007 second quarter results included a final mark to market expense of $36.5 million or $0.21 per diluted share related to the repurchase of the Lucas warrants. Excluding the final Lucas mark to market expense, earnings for the second quarter of 2007 would have been $41.3 million or $0.24 per diluted share.

Hasbro “We are very pleased with our second quarter and first half performance,” said Brian Goldner, Hasbro’s president and CEO. “The current strength of our product line is allowing us to invest in our future growth by developing our business in emerging markets, in entertainment and in digital gaming, while continuing to deliver strong earnings.”

Net revenue for the company’s U.S. and Canada segment grew 11 percent to $467.7 million. The revenue increase was attributed to Hasbro’s Indiana Jones, Star Wars and Marvel product lines, as well as growth in core brands, including Nerf, G.I. Joe, Easy-Bake Oven and its board game business. The company also said that Transformers toys “continued to contribute significantly to the segment in the quarter.”

Overall, Hasbro said its revenue from boys’ toys grew 13 percent while revenue from its girl-oriented lines jumped 24 percent. The preschool category was up 11 percent, with Playskool up 24 percent. The company’s games and puzzle business was up 12 percent for the quarter, with Monopoly up 26 percent, primarily due to “the continued strength of Monopoly Electronic Banking.”

The U.S. and Canada segment reported an operating profit of $43.7 million.

International segment net revenues for the quarter were $293.7 million, an increase of 15 percent over the same period of 2007. The results were helped by approximately $23.4 million in foreign exchange impact. Pacing the company’s overseas sales were growth in core brands, including Littlest Pet Show, Playskool, Furreal Friends and board games, as well as Indiana Jones, Star Wars, Transformers and Marvel products. The International segment reported an operating profit of $14 million, down from $15.3 million in 2007, reflecting investment spending in emerging markets.

To help drive growth further, Goldner said in a conference call to analysts that the company’s “been increasing our investments in a number of new markets this year.” Its moves include a new office in Brazil with dedicated sales and marketing support as the toymaker transition away from a distributor model, according to Goldner, and that it was in the process of opening offices in Russia, China and the Czech Republic.

"I'm very pleased with the earnings we announced today, while input cost inflation continues to be challenging, thus far we have been able to mitigate most of the impact through cost savings initiatives and pricing actions," said David Hargreaves, chief operating officer and chief financial officer.

He added that with cost increases out of China “being closer to the 17 percent to 18 percent range” than the 14 percent to 15 percent anticipated in February, Hasbro would raise prices by mid-single digits effective September 1 in order to maintain margins in light of rising costs.

“We already announced [the price increases] to our customers,” Hargreaves added. “They obviously don’t like it but they recognize that their own costs are going up ... and they’ve accepted it."

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